Candy Crush King IPO: $22.50, trades Wednesday

Mar. 25, 2014
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Candy Crush goes public. / King Digital

by Matt Krantz, USA TODAY

by Matt Krantz, USA TODAY

King Digital Entertainment, maker of the massively popular Candy Crush mobile app, priced its IPO late Tuesday in the latest example of young tech companies getting back into the IPO game.

The initial public offering - one of the biggest tests yet of investors' appetite for potentially dicey tech deals - raised $500 million for the 10-year-old company. The company sold shares to initial investors at $22.50 a share. That was somewhat disappointing, because the company had set an initial range of $21 to $24 a share, and other recent tech IPOs have priced above their initial ranges.

King will begin trading Wednesday on the New York Stock Exchange under the symbol KING.

It's a pivotal deal for the IPO market, which is in a boom that is shaping up to be the biggest since the dot-com frenzy. Yet so far, young tech companies haven't been a big factor in IPOs, but that could quickly change if deals like King work out. "The market is getting hotter for tech," says Francis Gaskins, director of research for Equities.com.

The King IPO is more than just child's play for investors. That's clear in the:

â?¢ Resurgence in the role of tech. Young tech companies such as King are traditionally the soul of a robust IPO market. But the number of tech IPOs lagged behind health care, specifically biotech, all year. Just nine of the year's 53 IPOs so far have been in tech, says Renaissance Capital. A vast majority, 29, have been health care.

â?¢ Return of young companies. Thanks to young companies such as King, the average age of companies with IPOs this year is 13 years, Renaissance says. That's down from 16 in 2013 and 20 in 2012. The return of younger firms to the IPO market underscores the viability of IPOs to executives vs. other ways to cashing out, including selling out to competitors.

â?¢ Rise in speculation. The fact investors might get excited about a stock such as King tells how much time has erased the pain of past broken IPOs in related fields. Zynga was riding the FarmVille game sensation when it went public in in 2011 at $10 a share. Since then, the shares are down 52%.

King has a distinction vs. other recent tech IPOs because it's profitable. The company says it had 408 million monthly active users at the end of last year. The company also earned $567.6 million during the year ended Dec. 31, 2013, up from a profit of $7.8 million in the prior year. Yet, there are signs of some exhaustion. King Digital's revenue of $602 million in the fourth quarter was down 3% from the third quarter.

The question is if King can become a hit game factory and keep releasing popular titles that keep consumers, and investors, coming back. King "may be a one-hit wonder," Gaskins says. So, too, investors will want to see more appetite for tech deals before pronouncing the IPO market's strength as lasting. "Tech is pushing in (the IPO market)," Gaskins says. "But some think it's a little like the bubble."